EXPORTS, GROWTH AND CAUSALITY IN LDCS - A REEXAMINATION

Using Akaike's optimal lag criterion in a Granger causality test, the causal relationship between export growth and economic growth (and vice versa) is re-examined for 20 countries. It is argued that earlier analyses which ignore optimal lags in Granger or Sims causality tests suffer from certain shortcomings which are overcome by the present approach. The results suggest some support for the export promotion hypothesis, especially in the case of well-known NICs and thus differ from previous applications of Granger test which did not adopt an optimum lag criterion, and which showed no causality from export growth to economic growth in such cases. However, they are inconclusive in evaluating competing hypotheses. © 1991.